By Yu Gao and Michael Lufkin

Amid all the coverage of the Communist Party’s third plenum last November, one important statement seems to have been overlooked: the Central Committee’s assertion on the need to improve compensation to farmers affected by the government’s forest protection programme.

Improving compensation is not only good for farmers. It is good for the environment.

Ever since 1998, poor farmers who live in mountainous regions have been asked to help preserve and improve ecologically sensitive forests and watersheds as part of the Natural Forest Protection Programme.

With the help of farmers and other rural residents, more than one million hectares of forestlands have become off-limits to commercial logging and other harmful activities. In addition to this national effort, provinces and prefectures have established almost another 80 million hectares of protected forests.

The programme has been hailed as a great success.

However, research indicates that the forest protection programme has caused considerable harm to local economies and farmers, especially in the poorest areas where forestry was an important source of employment and income.

This could jeopardise the programme’s long-term prospects and impact.

For example, in a village we surveyed in Yunnan, farmers’ income fell by at least one-third after timber production was restricted. According to another study of one township in Guizhou province, four years after logging was banned, annual per capita income fell by 109 yuan (HK$140) and 62 per cent of families fell below the poverty line.

Studies in Sichuan and Hubei have found increased unemployment.

And while it may be tempting to leave the farmers to find their own way in a post-logging paradigm, the government must recognise that the communities affected were among the poorest in the country even before the logging ban and that the farmers’ support for the ban is critical to its success.

Chinese officials recognised this as far back as 1996, when they called for the establishment of an “ecological compensation mechanism”.

The 1998 Forestry Law added that China would set up “a Forest Ecological Service Compensation Fund for the creation, cultivation, protection and management of natural protection forests and special-purpose forests that are providing ecological services”. The “Regulation of the Implementation of the Forestry Law” further mandates that “the operators of natural protection forests and special-purpose forests are entitled to compensation for the ecological services provided”.

However, the laws and regulations only contain general principles and fail to effectively address how affected farmers and communities would be compensated in the process.

As a result, the national average compensation standard under the forest protection programme was set at only 5 yuan per mu per year in the early 2000s, merely to cover forest management costs, but not rights-holder’s losses. The standard was raised to 10 yuan per mu per year in 2007 – it is progress, but far from enough.

What’s more, millions of yuan in compensation never makes it to farmers each year because of corruption or administrative red tape.

The problem of adequate compensation is not unique to the forest programme; it is also seen in other conservation programmes such as the “Grain for Green” programme that aims to return arable land to wild forests in China.

Furthermore, the question of adequate compensation has been a part of the global discussions on reduced emissions from deforestation and forest degradation.

There are international models that Chinese policymakers can rely on to guide their efforts: Costa Rica, for one, has managed to reverse one of the highest rates of deforestation in Latin America.

Already, there is movement in the right direction. Guangdong, Zhejiang and Fujian provinces began compensating farmers for their loss in 2012.

And, last year, the government committed to increasing the compensation for farmers to an average of 15 yuan per mu per year.

Establishing a truly fair and more consistent payment for ecological services, that covers not only the management and maintenance costs of the forest but also the diminished value of the land, will be challenging given the lack of legislation, financing and methodology for valuing ecological services.

But there is hope and increasing endorsement from the highest level of leadership.

Protecting and strengthening farmers’ land rights and interests will provide the foundation for rural development and the rule of law while also giving a boost to conservation efforts.

Gao Yu is China country director and Mike Lufkin is an attorney and land tenure specialist with Landesa, a global development non-profit that works to secure land rights for the world’s poor women and men. Follow us @Landesa_Global

This article originally appeared in the South China Morning Post.